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Sally Beauty Holdings Inc (NYSE:SBH)
Q4 2020 Earnings Call
Nov 12, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Sally Beauty Holdings' Fourth Quarter Conference Call. [Operator Instructions] And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Jeff Harkins. Please go ahead.

Jeff Harkins -- Vice President of Investor Relations and Strategic Planning

Thank you. Good morning everyone and welcome to the Sally Beauty Holdings' fourth quarter earnings conference call.

Before we begin, I'd like to remind everyone that we have made a presentation available for today's call that can be viewed from the link provided in our earnings press release from this morning or on our investor site at sallybeautyholdings.com/investor-relations.

I would also like to remind you that certain comments including matters such as forecasted financial information, contracts for business and trend information made during this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended.

Many of these forward-looking statements can be identified by the use of words such as believe, project, expect, can, may, estimate, should, plan, target, intend, could, will, would, anticipate, potential, confident, optimistic, and similar words or phrases. These statements are subject to a number of factors that could cause actual results to differ materially from expectations. Those factors are described in Sally Beauty Holdings' filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. The company does not undertake any obligation to publicly update or revise its forward-looking statements.

The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website.

With me on the call today are Chris Brickman, President and Chief Executive Officer; Aaron Alt, President of Sally Beauty Supply and Chief Financial Officer; and Marlo Cormier, Senior Vice President of Finance and Chief Accounting Officer. Chris will start by offering some thoughts on our very respectable fourth quarter. He will also touch on our thoughts about the current economic environment and our outlook on fiscal year 2021 and finish with our focus on our key focus and investments in fiscal year 2021 as we move toward the completion of our transformation plan. Aaron will then discuss our fourth quarter and full-year financial results, touch on our cash liquidity and also provide some perspective on fiscal year 2021. Finally, Chris, Aaron, Marlo and I will be available to answer your questions.

Now, I'd like to turn the call over to Chris.

Christian A. Brickman -- Director, President and Chief Executive Officer

Thank you, Jeff, and good morning everyone. I want to start by thanking all of our SBH team members across the globe whose dedication and hard work helped us deliver a great fourth quarter. Your efforts have turned us into an agile operator with real strength in both digital and physical retail. And you have set us up well for the future. I could not be more proud of our team and what they accomplished in spite of the countless challenges we experienced in fiscal year 2020.

During our last earnings call, we discussed the nimbleness and agility displayed by our teams and associates during the third quarter. As our business responded to store closures and consumer uncertainty, our our teams quickly pivoted to launch new e-commerce capabilities and service models. In June, we saw strong sales as a majority of our stores reopened. As we moved into July and the fourth quarter, we continued to see strong sales with the business normalizing. Of course, the environment continued to evolve around us as exemplified by California shutting down salons in many counties for parts of July and August. All in, we delivered enterprise positive same-store sales of 1.3% with strength in retail, helping to compensate for soft, but still positive same-store sales in the wholesale business.

Here are some of the key highlights regarding our fourth quarter. Our Sally Beauty retail business in the U.S. and Canada delivered same-store sales growth of 3.7% for the quarter. We saw continued strength in our core category of hair color, where we continue to gain share in the retail and pro channels. For the fourth quarter, hair color was up over 22% in Sally Beauty's U.S. and Canadian retail business, with unit growth and increased AUR. We also saw strength in the nail category for Sally Beauty's U.S. and Canadian retail business, which was up 11%. We continue to see solid stream and growth in our global e-commerce business. We delivered the highest gross margin in SBH history, driven primarily by the U.S. and Canadian retail business and our strategy of Fewer, Deeper, Bigger promotions. We grew adjusted EPS over the prior year by 9%. We ended the quarter with less debt and a strong balance sheet. And we continued our focus on cost controls, cash management and liquidity, and generated over $131 million in free cash flow.

Operationally, we also continue to invest in our business and launch new programs. Following our fast launch of Ship-From-Store and Same-Day Delivery in Q3, we launched 'Buy Online / Pickup In-Store' at Sally Beauty and it will reach all U.S. stores nationwide within a few weeks. We completed the national rollout of our new Private Label Rewards Credit Card Program to both Sally and BSG customers in the U.S. In just the first month, we had approvals for over 80,000 new card members with a slight weighting to the professional stylists over the retail consumer. We launched the second addition of Cultivate, which offers financial support, product distribution and mentorship for female-owned beauty brands. We executed a number of small acquisitions on the BSG side, gaining brand distribution rights, a small number of stores and new customers. We expanded our Ship-From-Store capabilities to 2,400 stores in the U.S. and nine provinces in Canada. And we successfully placed our new North Texas distribution center into service in August.

Now, let's turn to our thoughts on the current economic environment and our outlook for next year. Looking ahead to fiscal 2021, we will have to remain agile as our consumers continue to deal with the impacts of COVID-19. While our business is certainly defensive and more resilient than many retail peers, we expect an increased level of volatility, particularly in the first half of the year. Regardless of COVID-19, we remain confident in the direction we are headed, the investments we have made in our transformation plan over the past few years, and the resiliency of our categories.

As we stated on our last earnings call, we feel we are well-positioned to handle the uncertainty of the near term due to three key factors. First, our businesses are on trend. The Sally Beauty business is the industry leader of professional color for home use, and is perfectly aligned with the increasing DIY trends. Our customers can find all of their needed solutions or products for hair, nail and skin either online or in our stores. Additionally, they can find How-To content on our digital sites, starting with Hair Color 101 all the way through more complex application techniques. Alternatively a consumer can talk to a Sally associate at a store, who has been trained in hair color. We plan to retain and build on the new customers who have discovered us as they experiment with DIY hair and nails and try out new exciting colors. And we are ready to serve our traditional customers with more convenient service options as they become increasingly comfortable with returning to stores over time.

On the BSG side, while the salon business seems to be recovering more slowly, we are the industry leader in stylists' safety with our largest assortment of PPE including hand sanitizer, barbicide, gloves, masks and case. In addition, we have added more convenience -- we have more convenient store locations, more DSC's that are now digitally enabled and many of which are now trained and certified in salon safety protocols. And now we offer improved delivery service options to ensure we are convenient and safe for our professional customers. We will continue to build on this leadership position.

Second, we have the ability to operate effectively in an environment that will continue to be impacted by COVID-19. Customers and team members can feel confident in our stores, which have instituted the protocols required to operate safely. We have proven that we can rapidly evolve our service model to provide our customers with more choice on how they interact with us and more access to our inventory chainwide.

Third, we are sitting in an excellent liquidity position, with strong cash flow and cash on the balance sheet. Aaron will discuss this more during his remarks.

Finally, I will spend a few minutes talking about the key projects and investments that we will focus on in fiscal year 2021. First, we will continue our digital transformation by optimizing the guest experience and service offerings such as 'Buy Online / Pickup In-Store', which is rolling out across all Sally stores in the U.S. in November, and optimizing the impact of digital to the income statement by addressing operating changes, which will lead to cost savings. We will also replatform the BSG digital experience focused firmly on the pro and add further fulfillment options for BSG in the second half of fiscal year 2021.

Second, now that we have completed the rollout of our Private Label Rewards Credit Card Program in the U.S., we will be intensely focused on growing and optimizing the portfolio and program. On the Sally side, the program will enhance the existing Sally Beauty Rewards loyalty program by adding additional reward points to the customer spend. Additionally, the Sally e-commerce site is already set up to provide instant credit for online applications and accessibility to shop with their card online.

On the BSG side, card benefits include an additional 3% discount on purchases and adds better flexibility for stylists and pros to manage their cash flow and business. Through benchmark data, we know that private label credit card holders typically spend more per transaction, as well as having better retention rates. Therefore, our focus will be on driving activations while increasing basket size and share of wallet. This also translates to the P&L benefits related to interchange relief from traditional bank cards, as well as adding royalties from new account openings.

Third, as a significant part of our company's history, growth, and current assortment, our Sally Beauty division is partnered with over 25 black-owned brands in our current textured hair category. In fiscal year 2021, we have committed to growing these successful partnerships and expanding our offering to additional black-owned brands across both the Sally Beauty and BSG businesses.

Fourth, now that we have JDA, our new merchandising and supply chain platform, and our new North Texas distribution center, both up and live on a limited scale, our focus will be on expanding both of these initiatives. Once fully rolled out, JDA will improve product assortment by store location, improve out-of-stocks and greatly improve visibility and forecasting of inventory. Once fully functional, the North Texas DC will be our first distribution center that services all channels for both business segments and will deliver the benefits of increased speed to market, lower operating costs and will reduce the demand on our other DCs in our network.

In summary, while we continue to operate in an uncertain environment, at Sally Beauty Holdings, we believe we are a stronger company with even greater ability to deliver long term sustainable growth, driven by our enhanced capabilities and how we connect with our customers digitally, through our loyalty and credit card programs and expanded differentiated offerings, our enhanced infrastructure and omnichannel capabilities, and increased talent base, all of which are supported by a strong balance sheet and cash flow.

The bottom line, the challenges we faced in 2020 has simply made us better. They pushed us to accelerate our digital transformation to simplify and focus our business strategy and build a team that is prepared to win in a transformed retail environment.

Now, I will turn it over to Aaron to discuss our financial results and our liquidity in more detail.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Thanks, Chris, and good morning. I am delighted to be here to talk about the great work that the Sally Beauty Pro-Duo and Beauty Systems Group teams accomplished during the fourth quarter. Consolidated same-store sales went up. They increased by 1.3%. Consolidated revenue was $958 million for the quarter, a decrease of less than 1% from the prior year. The increase in same-store sales, led by our Sally Beauty U.S. and Canadian retail business was offset by COVID-19's modest impact on parts of our Beauty Systems Group business during the quarter, and a smaller store base with 23 fewer stores compared to the prior year. Finally, we saw a favorable impact from foreign currency translation of approximately 20 basis points on reported sales.

During the quarter, brick-and-mortar traffic was choppy and was down from the prior year due to the lingering impact of COVID-19, but average basket remained up due to an increase in units per transactions and an increase in average unit retail, which happened alongside an increase in units in our core differentiated category of hair color. As expected, customers are generally making fewer trips but buying more when they do come in and shop.

In contrast, we did see increased traffic to our digital channels. At the start of the quarter, even with the vast majority of our store network back open, our global e-commerce business grew rapidly. For the fourth quarter, e-commerce sales were $63 million, representing growth of 69% over the prior year, led by our Sally U.S. and Canadian e-commerce platform which delivered growth of over 113%.

Last quarter, we mentioned that during the peak of the COVID crisis, we had new e-commerce customers in our online U.S. retail channel that had signed up for our Sally Beauty Rewards loyalty program. Retaining these new customers was obviously a key focus for us and in the fourth quarter, we saw repeat purchases from approximately 60% of that new customer group. Similarly, last quarter we saw opportunity from competitor disruptions in the pro-channel where BSG saw 40,000 new hair color customers walk into our stores during the quarter. During the fourth quarter, we saw repeat purchases from approximately 50% of those new customers.

Let's turn now to gross margin, which is a simple story. It went up dramatically. Consolidated gross margin for the quarter was 51.1%, which is the highest gross margin rate in at least eight years. This represented a 150 basis point increase as compared to the prior year. The improvement was expected and is a signal of our increasing retail fundamental capabilities. It was driven primarily by better coordination and execution of fewer promotions across all businesses and an intentional positive mix shift toward higher margin categories like hair color in the quarter, but partially offset by a reduction in vendor allowances from fewer promotions and reduced inventory purchases.

Consolidated gross profit for the fourth quarter was $489.1 million, an increase of approximately $10 million from the prior year. As a percentage of sales, selling, general and administrative expenses were 38.3% compared to 37.7% in the prior year, driven primarily by higher e-commerce delivery expenses, which were expected and are something that we're working speedily upon, continued transformation investments and the deleveraging impact of lower sales volume compared to the prior year.

GAAP operating earnings and operating margin in the fourth quarter were $119.7 million and 12.5%, respectively, compared to $116.1 million and 12%, respectively in the prior year. After excluding charges related to the company's previously announced restructuring efforts in both years and COVID-19-related income in the current year from a Canadian wage subsidy, adjusted operating earnings and adjusted operating margin were $120.3 million and 12.6%, respectively compared to $115.3 million and 11.9%, respectively in the prior year.

Both GAAP and adjusted diluted earnings per share in the fourth quarter went up. GAAP diluted earnings were $0.62 per share and adjusted diluted earnings were $0.63 per share, both compared to $0.58 in the prior year, representing growth of approximately 7% and 9%, respectively as compared to the prior year. Stronger gross margin rate, lower income tax expense and a lower average share count all contributed, partially offset by modestly higher selling, general and administrative expenses, and an increase in interest expense.

In the fourth quarter, the company had net earnings of $70.2 million compared to $69 million in the prior year, an increase of 1.7%. Adjusted EBITDA was modestly higher at $146.6 million in the quarter compared to $144 million in the prior year. Adjusted EBITDA margin also increased to 15.3%.

Now, turning to segment performance. Global Sally Beauty segment same-store sales increased by 1.7% for the fourth quarter. The Sally Beauty business in the U.S. and Canada, which represent 80% of the segment sales for the quarter had a same-store sales increase of 3.7% in Q4. Europe had a decrease in same-store sales for the quarter, while Latin America had a significant decline in same-store sales, given approximately 15% of the stores were closed for more than half the quarter due to COVID-19. Our global Sally Beauty segment generated revenue of $577 million in the quarter, an increase of about 1% compared to the prior year, driven primarily by the increase in same-store sales, a favorable foreign exchange impact of approximately 40 basis points, partially offset by 42 fewer stores compared to the prior year.

Our global Sally Beauty e-commerce business continued to show strength with growth of 86% in the quarter, led by our U.S. and Canadian e-commerce platforms, which delivered growth of 113%. For the quarter, gross margin for the accounting segment landed at 57.6%, an increase of 180 basis points compared to the prior year. We saw Sally Beauty business in the U.S. and Canada also hitting a record gross margin level of 61%. Segment operating earnings were $103.9 million in the quarter, an increase of 10.6% compared to the prior year, for all the reasons that I've just discussed. Segment operating margin increased to 18% compared to 16.4% in the prior year.

Now turning to our Beauty Systems Group segment. Total segment same-store sales increased by 0.6% for the quarter. While we had higher expectations for the quarter from Beauty Systems Group, there were a number of headwinds impacting comp sales. First, the COVID-19-related shut-downs of California salons in many counties in July and August had an unfavorable impact of approximately 90 basis points on the segment's same-store sales. We also tested a variety of techniques in stores, which will set us up for success in subsequent quarters.

Net sales for the segment were $381 million in the quarter, a decrease of 3.3% compared to the prior year. The decline in non-comp sales was driven by COVID-19. COVID-19 and the necessary social distancing guidelines forced the cancellation of a significant trade show at which BSG sells goods. It also constrained the reopening and velocity of customer appointments at our national chain customers. We also saw the creation of full service back orders during the quarter resulting from some inventory gaps. Finally, we saw an unfavorable foreign exchange impact of approximately 10 basis points.

BSG's e-commerce platform grew by 55% for the fourth quarter driven by consistent demand throughout the quarter. BSG's gross margin increased by 60 basis points to 41.2% in the quarter, driven primarily by fewer promotions, but partially offset by lower vendor allowances. Segment operating earnings for BSG were $50.6 million, a decrease of 14.4% compared to the prior year, driven primarily by the decrease in net sales, but partly offset by the increased gross margin rate. Segment operating margin declined to 13.3% compared to 15% in the prior year.

Let's talk about cash. We generated a lot of it. During the fourth quarter, the company delivered cash flow from operations of $153 million, an increase of 31% compared to the prior year. Payments for capital expenditures in the quarter totaled $21 million as we continued to invest against our business transformation. Investments in the quarter included further work on our digital capabilities and e-commerce platforms, and optimizing our supply chain through our JDA and North Texas distribution center efforts. Free cash flow was $131 million in the quarter, which represented a 67% increase as compared to the prior year. I should note that we saw a significant cash benefit from a reduction in inventory, which carried over from Q3 into Q4.

The combination of our efforts to manage cash, purposeful SKU rationalization as part of our merchandising transformation, and some soft supplier disruption put us in a position where our inventory levels came down too far, and we are acting during Q1 to fix that. More on that to come.

During the fourth quarter, the company used a portion of its cash to reduce its debt levels by $445 million, including paying off its outstanding balance on its revolving line of credit by $375 million, the entire FILO loan balance of $20 million and $50 million of the fixed portion of its Term Loan B. The company did not repurchase any shares during the quarter. In addition, the company also completed a small acquisition in Quebec, Canada, which added 10 stores, 17 direct sales consultants and exclusive distribution rights to premier professional hair color and hair care brands such as Wella Professional and Goldwell.

At the end of the fourth quarter, the company remains in a very strong liquidity position with $514 million cash on the balance sheet and a zero balance on its $600 million revolving line of credit. Generally, the company ended the quarter with a leverage ratio of 2.88 times, reflecting our significant cash balance. For comparison purposes, the leverage ratio that we often cite, as defined in our loan agreement, where the impact of cash on hand is capped at $100 million for net debt calculation purposes was 3.79 times.

Turning to our consolidated full year financial results. For the full fiscal year, consolidated same-store sales decreased by 8.1% due almost entirely to COVID. Consolidated net sales were $3.51 billion, a decrease of 9.3%, driven primarily by the impact of COVID-19 shut-downs, operating 23 fewer stores and an unfavorable impact from foreign currency translation of approximately 10 basis points. Global e-commerce sales grew by 103% compared to the prior year, once again led by our U.S. and Canadian e-commerce platforms, which delivered growth of 184%.

GAAP diluted earnings per share for the full fiscal year were $0.99, a decline of 56.2% compared to the prior year, driven primarily by the disrupted operations caused by COVID-19. Adjusted diluted earnings per share, excluding COVID-19 net expenses in the current year and charges related to the company's transformation efforts in both years, were $1.22, a decline of 46% compared to the prior year.

For the full fiscal year, cash flow from operations was $427 million, an increase of 33% compared to the prior year. Net payments for capital expenditures totaled $111 million. Operating free cash flow was $316 million, an increase of 39% compared to the prior year. For the full fiscal year, the company repurchased 4.7 million shares at an aggregate cost of $61.4 million.

Let's turn now to observations on fiscal year 2021. Whether it is lingering COVID-19 concerns or how long it will take the economy to fully recover or possible follow on from the November elections, fiscal year 2021 will certainly present its share of twists and turns. We can already see this in the current operational status of the fleet. All stores in the United States and Canada are currently operating. However, stores in the few metropolitan areas, like El Paso, can only operate as curbside locations. Additionally, we are seeing occupancy restrictions in parts of New Mexico and Colorado.

Europe has been more aggressive. We have seen stores in Belgium, Northern Ireland and Wales closed due to local restrictions, only to reopen shortly afterwards. Currently, of our 450 stores in Europe, approximately 180 stores are completely closed due to COVID-19 restrictions with the remaining stores either fully open or operating curbside, where permissible. The majority of the closures currently are in England and France. The result is we are seeing e-commerce accelerate again in Europe, similar to what we saw back in the third quarter.

Given all of this, we are not able to provide detailed financial guidance for fiscal 2021. However, the company can offer a couple of broad observations. Without adjusting for the impact of COVID restrictions, which are impossible to predict, the company would expect that sales in 2021 should be higher than 2019, even with the fewer stores in the fleet. While we can't predict COVID, we are far better prepared than we were in fiscal '19 or even in March of fiscal 2020.

Regarding our store fleet, the company has revised its short-term plans with respect to new stores. The company now expects that net store count will be approximately flat for the year, with a small number of new stores being added to the footprint, which will be offset by a similar number of store closures as we optimize core locations. The company will, however, take advantage of the current leasing environment and relocate approximately 70 stores. Remodels were mostly put on hold for the time being. We expect our digital business to continue to grow and are continuing to invest in that area. The company expects continued strength in gross margins, particularly in the first three quarters compared to last year, and particularly in Sally Beauty U.S. and Canada.

The company expects SG&A investments will, on a full-year basis, rise to reflect our continued investments, particularly in labor and e-commerce distribution. However, the company is working hard on offsets to those investments and use it as an area of opportunity with more work for us to do. The company expects to continue to generate strong cash flow, so also expect to be back-end loaded, given the company's significant upfront investment in inventory that I referenced earlier.

Finally, let's address capital allocation. Our priorities are relatively unchanged. The company will invest in this business. As I noted earlier in Q1, this will take a formidable investing in new inventory. We will also continue our business transformation, though, with some efforts to scale back to reflect the uncertain environment until a vaccine is available. We will continue to hold significant cash on our balance sheet while we monitor how COVID-19 plays out over the first and second quarters. As we grow increasingly confident that the environment has stabilized to our satisfaction, we will consider deploying additional excess cash to reduce our debt levels in the direction of moving our leverage ratio to 2.5 times.

That all being said, as we look at the stock price versus our underlying business fundamentals, we may smartly consider share repurchases from time to time. We have not repurchased any shares so far this fiscal year.

Thank you for your time this morning. Now, I would like to turn the call back over to the operator for Chris and I to take your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question will come from the line of Steph Wissink with Jefferies, and your line is open.

Stephanie Wissink -- Jefferies -- Analyst

Hi, good morning everyone. Christian and Aaron, my first question for you is just related to the color and nail strength that you saw, which would imply that the other categories within your product mix were down pretty sharply. So if you can just help us contextualize how the composition of that category performance was across your chain, that would be great. And then secondly I recall on the last quarterly conference call, you talked about July being up in the mid single-digits, and with the full quarter kind of up just a little under 2%. It would imply a pretty sharp deceleration in August and September. So if you can maybe help us think about the cadence, and then if you've seen any change in that cadence as we have rolled into the first fiscal quarter, that would be very helpful as well. Thank you.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Sure. Good morning. I'll address the questions in reverse order. What we saw from the quarter was a barbell quarter where we saw strong July, much softer August as for reasons we've talked about, and in September recovered as we carried forward. So it's a barbell quarter. With respect to your categories, you're right, it's actually the case that we had some real strength in our defensible core, in hair color, care and nail. But we did see weakness in other categories. Part of it is driven by the consumer. For instance, we don't sell a lot of cosmetics. It's not a core -- it's not a core trip driver for us. But we did see a decline in the cosmetics category and some categories like hair extensions, offset by the growth we saw in hair color in particular, which was both consumer-driven and strategy-driven as we have increasingly focused our assortment and inventory spend in those areas around hair color and hair care.

Christian A. Brickman -- Director, President and Chief Executive Officer

Correct. And Steph, just to point you back to -- Sally finished with a 3.7% [Phonetic] comp for the quarter, which was very strong, a little bit of the barbell impact therein but less of it. But remember that BSG dealt with significant salon closures throughout the network. As an example, California, reclosed for approximately six weeks during that period. And obviously that was a significant hit. We expect there'll be more volatility like that where regions or areas of the country may close salons again.

Stephanie Wissink -- Jefferies -- Analyst

That's great. And then just one follow-up on your e-commerce business. I'm wondering, I know it's only about $60 million to $65 million, but as you look at that percentage of the sales, what do you expect that to be as you look ahead? And then are you learning anything about the composition of online orders versus your in-store orders or in-store transactions? Is there a unique composition or are they very similar across all channels?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Well, our aspiration continues to be what it was, which is we want to get to the 10% penetration figure for our categories. We're not there yet. We have more opportunity, although we are seeing nice increases in penetration across the entire business. And with respect to the basket, our answer now is different than it would have been a year ago. A year ago, the answer would have been that the online consumer is typically very deal-driven and is looking for more commodity categories like appliances.

Now, what we're seeing is real strong presence in color, helping to drive that growth and nail as well as care. We drove a lot of -- we drive a lot of those categories for the digital channels. We're quite pleased with that. It's, in part, also, though, driven by change in strategy where we are far less promotional online than we were and far more focused on content, the How-to, right? In the world in which we're operating where the consumer is not as willing to go out the door, go to a stylist even on a -- the retail business is responding by making it easier for her to try it or understand it or evolve it or fix it, right? That's really the strategy.

Christian A. Brickman -- Director, President and Chief Executive Officer

And on the wholesale side, Steph, I'll add that in general, it has been much more like our retail business all along. But Aaron's right, on the retail side, those two businesses are converging and becoming much more similar and that's what we should be in an omnichannel business.

Stephanie Wissink -- Jefferies -- Analyst

That's great. Last one for us is just on inventory. I think, Aaron, you mentioned that it was a bit lower than you would have expected. So maybe just help us think about remediation of buying back into inventory and planning into more stability in the business going forward.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Yeah. Well, what I can tell you is this, we're at, I think, a six-year low from inventory, we were in Q3 and we were in Q4, even though we have been aggressively buying inventory back into the fleet for both Sally Beauty and the BSG. And while that activity started in Q4, right, it certainly carried into Q1 and we believe that we have sales upside, resulting from being back in stock in color in BSG, and in particular brands and as well as in key categories like clippers in retail.

Some of it was driven, as I called out, by our efforts to manage cash, given the crisis earlier in the year, some of it was driven by a very thoughtful and purposeful set of assortment changes and driven by our merchandising organization, and some of it was driven by some supplier disruption as our suppliers also deal with COVID-19. So we're confident we're back on the right track. It will, however, be a use of cash for the first quarter in particular as we carry forward. But we think it's -- we think it was also an upside.

Stephanie Wissink -- Jefferies -- Analyst

Thank you.

Christian A. Brickman -- Director, President and Chief Executive Officer

Thanks, Steph.

Operator

Thank you. Our next question comes from the line of Oliver Chen with Cowen, and your line is open.

Oliver Chen -- Cowen and Company -- Analyst

Hi. The gross margin performance has been impressive. What do you see ahead for what's driving that and also in the context of managing inventories in the composition and freshness of inventories? Some of the supply disruption may or may not be out of your control. Would love your thoughts there.

Christian A. Brickman -- Director, President and Chief Executive Officer

I'll take a first shot and then hand over to Aaron. Listen, I think, as we said, and as we stated, Oliver, we've really made a big focus on Fewer, Deeper, Bigger promotions and much more focus on content and education as how we want to serve our customers, as opposed to using promotions to drive volume. And as a result of that, that's translating into much higher margins. There is some geography shift in the P&L as well associated with delivery expense falling down lower. And, as Aaron mentioned in his comments, that will be a major focus for us and obviously we expect 'Buy Online / Pickup In-Store' to be -- to play a major role in helping us address that.

In terms of freshness of inventory, I do think we can address most of the issues we have in terms of out-of-stocks ourselves. It's within our control. There are a few vendors that are struggling to keep up or get back into full stock and that will take longer just because that's out of our control. But I would say the majority of it we can fix and we are in the process of fixing right now. And, Aaron, I don't know if you want to add anything to that.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

It's all right, I think it's well said. At its core, Oliver, the gross margin side of the retail side, we believe that we have a differentiated core that we are conveying value and that we don't need to over-promote in those categories. And we've been gradually moving in that direction and Q4 saw us get to a real turning point on that.

Oliver Chen -- Cowen and Company -- Analyst

And a final question, the engagement of new customers was impressive in some of the statistics you mentioned. On the e-commerce front, what are your thoughts on generating incrementality relative to cannibalization of retail? And also, what's ahead in terms of managing margins in that segment? Thank you.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

I believe your question is on retail, Oliver. The -- what I would tell you is we believe there is opportunity for incrementally. As I've said on prior calls, once we can get the consumer to enter our store or buy from us online, the quality of our product and the different experience speaks for itself. And so once we've got them, we really got them. And so we believe that we have the opportunity to continue to build those baskets with them and drive more trips.

With respect to your question on gross margin, what I would say is, this is part of a concerted strategy in the retail business. We believe that we will have continued strength in gross margin as we carry forward, particularly as we manage through the holiday season here. We're not necessarily a holiday-focused business, and so I expect good things to continue.

Christian A. Brickman -- Director, President and Chief Executive Officer

And Oliver, just to add to that real quick, I mean, with now -- with Ship-From-Store scaled up across the network and with 'Buy Online / Pickup In-Store' scaling up now, the stores are integrally -- are fully integrated into our e-commerce business. It's all one. It truly is an omnichannel business and the stores are going to serve a major part of our e-com business. And what we're excited about is, that allows us to really leverage the expertise in-store, leverage recommendations, add to the basket, and we see that as how we want to grow the business long term as it's one seamless way of interacting. Whichever way the consumer wants to interact, we'll interact with them and we'll offer both our expertise and our products through this.

Oliver Chen -- Cowen and Company -- Analyst

Thank you. Very helpful. Best regards.

Christian A. Brickman -- Director, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question will come from the line of Rupesh Parikh with Oppenheimer, and your line is open.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Good morning, thanks for taking my question. So, I guess, I want to start out just at a high level. Just curious as you look at the categories you compete in, what type of growth rates do you think you saw or -- sorry, what type of declines do you think you saw during the last quarter? And then any sense whether you've gained market share during this period on both the Sally Beauty Supply and the BSG sides?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Rupesh, good morning. Great question. I'm not going to give you category specific decline numbers, but what I can tell you broadly is this, we did see growth in hair color. We saw growth in nail, as we called out. We saw good business in care. And these are the three core categories for us. We saw declines in sales in most of the rest of the portfolio, not all of it, where -- and in particular I would point to cosmetics. We don't have prestige or even masstige in the business and so we weren't terribly surprised by that. We also saw some declines in areas like hair extensions, right, where we have not, for the last couple of years, played heavily there. And so on balance, as I think about the portfolio, we're winning where we're focused. And we have work to do in the basket-filled categories that are around the core.

Christian A. Brickman -- Director, President and Chief Executive Officer

I think the other thing I would add, Rupesh, is some of this is just tied to changes in consumer behavior and lifestyle right now. Right? So we are seeing declines in appliances like curling irons and styling tools. We're seeing declines in things like hair sprays. If you're not going out as much, whether that be to dinner or to events and things like that, then your need to significantly style your hair and purchase styling tools and styling aids is going to decline. So, as Aaron pointed out, we're really excited about the strength that we're seeing in our core. We assume those other things will come back as the consumer returns to normal behavior sometime later next year.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

And I would be a bad CFO if I did not point out, Rupesh, that the areas where we are seeing our growth are our higher margin categories.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Okay, great. And, Aaron, that's a good segue into my next question. So, really strong gross margin improvement this quarter. As you look forward, like any sense of the improvement that we're seeing now that any portion of that could be like a more of a sustainable improvement, I guess, longer term?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

We do believe it's a sustainable improvement carrying forward, particularly in the retail business. Now at some point, call it, Q4 next year, we will lap, where we are. But as we think about the year ahead, we do believe that we have continued opportunity and this is not a one-off quarter on the gross margin line. We've rationalized our inventory, we've rationalized our promotional structure, the merchandising team and the planning and allocation team is working better together, between themselves with reps and the rest of the organization than they ever have. And so we view it as real opportunity.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Okay, great. And my last question, and maybe, I guess, this one is for Chris. If you look at salon demand, are there any sense of where we are in salon demand versus pre-pandemic? Like, I don't know, are we down 20%? Or -- I was just curious as if you look at the industry maybe one on the BSG side, like, where -- when you talk to your salon owners and stylists, like, where you think the industry is from versus pre-pandemic level?

Christian A. Brickman -- Director, President and Chief Executive Officer

And I don't have a lot of data to share because it's not well tracked. I do believe it is down. I don't think it's down as 20%. I think the reality is there is disruption in the market, there are restrictions in some markets. Salons often can't operate at the same capacity. A great example is our chain business, where we handle distribution to large chains that are focused on lots of volume -- high volumes of clients. They are down more significantly because they just can't process as many clients in a day, given the restrictions.

So I do believe it is down. We're not -- we're down just a little bit. And as you saw, BSG actually had positive same-store sales, overall, which is great. And I think that net result of that is I'm hoping we're gaining share. We're certainly working hard at it, we've seen a lot of color conversions, where we've been able to pick up new accounts. But I expect that it's going to take some time before the salon business returns to normal. It'll be the back half of the year or even later.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Okay, great, thank you for all the color.

Christian A. Brickman -- Director, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Mark Altschwager with Baird, and your line is open.

Mark Altschwager -- Baird -- Analyst

Hi. Good morning. Thanks for taking my questions. I guess just to start out, and I apologize if I missed it, but is there any color you can share on the quarter-to-date comp trends you're seeing?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Mark, during our last earnings call, we announced that we would not be providing monthly updates thereafter.

Mark Altschwager -- Baird -- Analyst

Okay. Okay, fair enough. And then on the gross margin, not to kind of keep beating on it here, but you just concluded, I guess, a very volatile year on the gross margin front. I think Sally Beauty, there is nearly 900 basis points spread between kind of Q3 and Q4 rate, understanding a lot of kind of one-time factors at play. You outlined a lot of it, positive changes here with inventory and what you do with promotions.

I guess, how do you feel about kind of just the ability to deliver a steadier gross margin trend in the future? Do you think we're kind of past some of this volatility? And then, just as you kind of think higher level, I mean, how should we be thinking about kind of a normalized baseline gross margin rate at Sally Beauty Supply in consolidated basis as all of these changes take hold?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

You raised a series of great questions, Mark. Let me attempt to address them best I can. What I would tell you is, you're right, we had a very significant difference in Q3 and Q4 from a gross margin rate perspective in Sally Beauty. If you look back at our transcript from Q3, you'll see I walked through a very detailed bridge of the one-time actions we were taking in connection with our inventory at that time. Q4 reflects more of a steady-state margin structure for Sally Beauty in the U.S. and Canada. Right? We saw particular strength there. Look, in the European business, we believe we have some more opportunity to work on our gross margin structure there. It, of course, is a little bit different business system. It's more of a mix of professional and retail. And then BSG, we continue to look to optimize to that as well.

So I take a fair amount of comfort from where Sally Beauty in the U.S. and Canada is at 80% of the segment sales as we carry forward, and we're not anticipating additional one-time actions to what we saw in Q3.

Mark Altschwager -- Baird -- Analyst

And that's very helpful. And, I guess, just finally, I was hoping to also just going to ask a big picture question on sort of the state of the pro-stylist market, like, is -- do you have a sense of how many salons have closed, maybe how many have permanently closed? And I would think the pressure on salons has maybe just accelerated the shift to booth renting. Is that something you're seeing? And, if so, is that a headwind to BSG but tailwind to Sally Beauty? Or -- and I think it's not quite that simple, so -- and obviously a very volatile period we went through and are continuing to go through. So would just love your high-level thoughts on some of the more structural shifts in the market that are going on, versus some of the factors that might kind of normalize here in the coming months.

Christian A. Brickman -- Director, President and Chief Executive Officer

Yeah, I mean. Mark, I think you're right. There is -- it is a disrupted market. It's disrupted most in high volume change as I mentioned. It's also disrupted in large urban salons that obviously have tried to put a lot of people through in a very tight space. Those are the most disruptive, but even salons that might have had 12 chairs in the more mid-market city maybe are operating eight now in order to maintain space restrictions and then those stylists are displaced. What that does mean is you're exactly right. It does mean there probably will be a surge in booth renting, a surge in suite rentals, as well as small salons starting up in maybe six months as stylists go out on their own.

In general, that's probably good for the BSG business because it supports the retail side of BSG. Some of the largest salons and larger accounts are often served directly by brands and manufacturers. And so fragmentation, over time, should help our store business, but I think it's going to take time for all that to shake out.

Mark Altschwager -- Baird -- Analyst

That's very helpful. Thanks for all the color.

Christian A. Brickman -- Director, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley, and your line is open.

Simeon Gutman -- Morgan Stanley -- Analyst

Hey, good morning, everyone. I want to ask again on the gross margin in SBS. If you look at the roughly 200 basis point improvement year-over-year, can you talk about how much roughly helped lower promotions? And then, Aaron, you mentioned better mix of product. Can you talk about those buckets?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

We have not historically disclosed a mix analysis that way and so I think what I observe is most of the benefits, I'm not going to quantify further, comes from rationalizing our pricing and promotional structure. Second aspect of that would be mix.

Simeon Gutman -- Morgan Stanley -- Analyst

Got it. Okay. And when we're speaking to sustainability of these things, I don't know if you want to pin a number to it, but the gross was at 57%, I think, level and I think the U.S. was even stronger. That is the right way to think, so what we saw in the fourth quarter is a fair gauge of sustainable gross margin for that business going forward?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Yes.

Simeon Gutman -- Morgan Stanley -- Analyst

Great. Okay. And then, look, we -- I wanted to ask Chris, I know we've known this that Wella may have been separated from Coty for some time. Curious if there is any implications, good, bad and different to think about for one of your programs moving -- changing hands.

Christian A. Brickman -- Director, President and Chief Executive Officer

The reality is that separation hasn't occurred yet. I believe it occurs early next year, so it's coming soon. I don't expect that it'll change much. We resigned a long term contract with them earlier this year. And, obviously, we're focused on growing their color brand -- their professional color brand exclusively through BSG, and then obviously we sell color brands on a non-exclusive basis through Sally that they also own. So our plan is to work with the new management team there to grow their brands and to work together to continue to expand the business and grab market share where we can. And so, at this point, I don't see any change in operating strategy, other than I'm hoping we'll see more innovation from that business over time with more focus.

Simeon Gutman -- Morgan Stanley -- Analyst

Great. Okay, thanks, guys.

Operator

Thank you. Our next question comes from the line of Jonathan Keypour with Bank of America, and your line is open.

Jonathan Keypour -- Bank of America -- Analyst

Hi, good morning, everybody. Thanks for the question. Just wanted to get a little bit of information on how you guys are thinking about the holiday season coming up. I know, you mentioned that it's not usually -- it's not a very big part of the year, but I just wanted to know how you were seeing demand into that quarter, how you're thinking about how it might play out and whether or not there'll be any even small incremental promotion compared to what we saw this quarter. And then after that, if you could touch on, given the strength of your e-commerce business so far, is there a longer-term change in how you're viewing store footprints, and maybe thinking about the ability to sort of translate those in-store purchases more online and then you have a smaller cost and footprint and all that? Thank you.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Great questions. Let me attempt to address the first, and Chris will take the second. With respect to Sally Beauty and the -- our second quarter, which is already under way, the difference I would point you to is the difference not versus Q4 -- our fiscal Q4, but rather versus prior year. We are not a terribly holiday-oriented enterprise. That said, if you walked into a Sally Beauty store, or if you went on to sallybeauty.com or sallybeauty.ca, what you would see is a very tailored merchandise assortment to actually speak to gifting, right? And our merchants have taken a much more selective cut at what goodness looks like there. And so while we will have holiday offers, they'll be narrower than they were in previous years.

Similarly, from a promotional cadence, and just say, maybe going to the gross margin questions that folks have been asking, we're going to be very careful about it, right? We are not participating in a race to the bottom that a lot of retailers have under way right now as they think about, not Black Friday, but rather, black November, right? We will -- there will be promotions. Right? We are focused on what the right promotions are, but we have moved to a strategy, which is much more content focused, helping our consumer, emphasizing the categories in which we have a differentiated core, and going from there. That would be our consistent strategy as we carry forward.

Christian A. Brickman -- Director, President and Chief Executive Officer

Yeah, on a broader basis, if you just think about holiday, from what I've seen, and I have a circle of retail CEOs that I talk to regularly, obviously it's going to be spread out, right? Rather than being concentrated in specific days or weeks, it's going to be much more spread out. I actually don't think it's going to be as promotional as people are worried about, because I believe a lot of retailers did not buy as heavily into inventory during the summer months and before as they were conserving cash as they went through the crisis. And I've heard that from a number of my peers. Because they don't have as much inventory, even if demand is a little soft, they don't have a lot to get rid of.

So I just don't think you're going to see quite the level of clearance sales or panic sales in previous years, because I just don't think the inventory sitting in the stores or in warehouses, that needs to be sold off.

Jonathan Keypour -- Bank of America -- Analyst

Great. Thank you.

Christian A. Brickman -- Director, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of William Reuter with Bank of America, and your line is open.

William Reuter -- Bank of America -- Analyst

Hi. I know there's been a lot of questions about this, but I'm just going to ask one more, and it kind of reverts to a comment you just made there. You mentioned, you're going to continue to remain fewer and deeper. I would have expected that many competitors and other channels where customers could shop for these products, that they would have been pulling back on promotions too, and that this may be a permanent opportunity. But then your last comment sounded like you believe that other retailers may not be pulling back in the same way on promo. I guess, what are you seeing in the promotional environment from any other competitors and expectations for that?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Great question. I want to thank you for asking me to clarify that. My comment was speaking to retail broadly, not necessarily to retailers with which we directly compete. And, of course, we have a very diverse competitive set as we carry forward. I agree with your observation that there is a structural opportunity in the industry, but it is the case that some, for those retailers that are not as well situated as we are, that don't have a stronger financial foundations, that they will be tempted to promote more heavily.

William Reuter -- Bank of America -- Analyst

That's very helpful. And then just one big picture question in terms of the moves online, and I guess I'm wondering how you view, particularly, given the store closures in Europe, industry moving online may change behavior of stylists permanently, and, I guess, how you are making sure that you are well-positioned for any of those changes? And that's it. Thanks.

Christian A. Brickman -- Director, President and Chief Executive Officer

Yeah, I mean, we think stylists are going to want more convenient service options, actually, not unlike consumers. So, we've already launched Same Day Delivery in our BSG stores. We're going to be bringing 'Buy Online/Pickup In-Store' in Q3 after we replatform the BSG website around the pro and make it much more pro-friendly. So, I think they want many of the same thing consumers want, because convenience is going to be key, and obviously safety plays a role in this too now. So, we're investing in those delivery options. We will make it easier for them to do business with, no matter how they do.

That being said, I think our stores will continue to play a very valuable role, as will our DSCs. So our stores -- there's many stylists who -- and I was in stores this week watching it, come in the morning before they go to work and buy to their schedule for the day. And that's how they manage cash, obviously. And our store is perfectly suited for that, because we open at 8 a.m. in our pro stores, and they can come in and buy the days services, the colors needed for each customer, and then turn around and turn that immediately into cash for themselves through services.

So, I don't think that's going to change. And I think the fragmentation that's going on in the industry is going to make that even more necessary as more stylists end up becoming independent. And obviously, there's also then going to be an increasing role for our DSCs, but in a more digitally enabled way. They're going to be visiting more accounts through virtual visits, they're going to be pushing -- more of those orders are going to actually happen online than previously might have happened in a handwritten way. And we think that actually will drive both efficiency, as well as effectiveness of our full service teams as well.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

I want to add on one thought. Really for us it's -- we have an increasingly digitally savvy customer on both the retail side and the professional side. Our effort is to match that with a much more digitally savvy partner within Sally Beauty Holdings whether it be in the form of CosmoProf BSG or Sally Beauty Supply. So, one -- while our business is relatively small compared to some, one piece of uncertainty that we don't have to address that some e-commerce retailers are having to address these days is our ability to ship. We've just signed a new agreement with UPS, ensuring that we have the shipping capacity that we need for our growing e-commerce businesses as we carry into our fiscal Q1. So, we're delighted with that as well.

William Reuter -- Bank of America -- Analyst

Thank you very much.

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Thank you.

Operator

Thank you. And we will go to the line of Carla Casella with J.P. Morgan, and your line is open.

Carla Casella -- J.P. Morgan -- Analyst

Hi, just a couple clarifications on some of the prior questions. On the BSG side, how much of that business overall is the national accounts versus the booth renter? Have you broken that out?

Christian A. Brickman -- Director, President and Chief Executive Officer

We don't break it out, but it's not particularly large.

Carla Casella -- J.P. Morgan -- Analyst

Okay. It's primarily booth renting then?

Christian A. Brickman -- Director, President and Chief Executive Officer

The stores tend to serve the smaller independent stylists, the booth renter, the suite renter and the small salon, and then we have a full service business that serves larger independent salons.

Carla Casella -- J.P. Morgan -- Analyst

Okay. And then on the vendor side, and the lower vendor allowances, I'm assuming that's mostly related to the promotional environment, but I'm wondering if there is -- if it's a signal or a change based on just the vendor mix that you have today versus the mix in the past? Because I know you've gotten a lot of new vendors.

Christian A. Brickman -- Director, President and Chief Executive Officer

No. It's a 100% tied to lower -- less promotions.

Carla Casella -- J.P. Morgan -- Analyst

Okay. And then any thoughts on -- you talked about your capital allocation, any thoughts on refinancing the '23 -- 2023 notes since it's a relatively short maturity?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

I think we are very focused on our towers, right? And we'll take the right action at the right time. As we see -- as we're going to get through this quarter, we'll see where we go. Hopefully you can take from the proactive actions we took in March, April, and May that our finance and treasury teams are always looking to optimize that.

Carla Casella -- J.P. Morgan -- Analyst

Okay. I just forgot one question related to the vendors. Given the changes you've made in terms of bringing new vendors, has your top-five vendor mix changed, and can you provide those?

Christian A. Brickman -- Director, President and Chief Executive Officer

No, it hasn't changed. I don't know if we have released that previously, but it's all the big ones you would know, so, it's Henkel, it's L'Oreal, it's Coty and J Paul Mitchell, it's that crew.

Carla Casella -- J.P. Morgan -- Analyst

Okay, great. Thank you.

Operator

Thank you. We will go to Rupesh Parikh from Oppenheimer. Your line is open.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Good morning. Thanks for taking my follow-up question. I've been getting this question from a few investors. So, there's commentary in your prepared comments, just that you would expect sales in, I believe, FY '21 to be higher than FY '19. I'm just curious, what gives you that confidence, just given, obviously the volatility out there and you are seeing store closures in some of your different markets?

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Well, thank you Rupesh for the clarification. My remarks were purposely -- they purposely said, unadjusted for COVID, right? We can't predict what COVID is. But the point we're trying to make is, we have made such great progress on the transformation, and we've driven so much change. Our capabilities, our talents, our process, our technology, everything is in such a different place, that unadjusted for COVID. Even with the smaller fleet, we would have expected sales to be higher in '21 than '19. I can't predict COVID, none of us can, but we are going to manage with the better capabilities and assets that we have.

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Okay, great, thanks. I had to ask that question.

Operator

Thank you. And I'm showing no further questions in queue. Please continue.

Christian A. Brickman -- Director, President and Chief Executive Officer

Right. Well, thank you all for your questions today. In summary, as we begin fiscal year 2021, we are focused on completing our transformation plan, while maintaining stringent financial discipline and ample liquidity as uncertainty remains as to the duration and severity of the pandemic. Our strategic initiatives will involve capitalizing on strong consumer interest in DIY hair color, building and refining our digital customer experience, including the addition of 'Buy Online/Pickup In-Store', growing our new Private Label Rewards Credit Card Program, expanding the rollout of JDA to the rest of the distribution centers, and growing our partnerships with female-owned and black-owned brands.

This will provide our company with a strong platform as we navigate past COVID and achieve our goal of sustained long term profitable growth. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Jeff Harkins -- Vice President of Investor Relations and Strategic Planning

Christian A. Brickman -- Director, President and Chief Executive Officer

Aaron E. Alt -- Senior Vice President and Chief Financial Officer, President of Sally Beauty Supply

Stephanie Wissink -- Jefferies -- Analyst

Oliver Chen -- Cowen and Company -- Analyst

Rupesh Parikh -- Oppenheimer & Co -- Analyst

Mark Altschwager -- Baird -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Jonathan Keypour -- Bank of America -- Analyst

William Reuter -- Bank of America -- Analyst

Carla Casella -- J.P. Morgan -- Analyst

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